Domestic Support and Bankruptcy

The bankruptcy automatic stay (which occurs upon the filing of bankruptcy) does not suspend or stop your duty to pay child support or alimony. Whether the obligation set forth by a divorce decree can be discharged in a bankruptcy is dependent upon on whetherthe obligation is characterized as support or as a property settlement. In many instances, obligations for property settlement, such as a hold harmless, can be discharged in a Chapter 13 bankruptcy, while obligations for child support and alimony cannot be discharged in any bankruptcy. Federal law, not state law, determines whether an obligation, although imposed by the state, is a support obligation or a property settlement obligation.

Domestic Support Obligations Priority Status

In addition to being non-dischargeable, alimony and child support payments receive priority status in bankruptcy proceedings. In a Chapter 7 bankruptcy cases where the Chapter 7 Trustee has found assets to liquidate, support obligations must be satisfied before distribution of any funds to other unsecured creditors. In a Chapter 13 bankrutpcy, the debtor must provide for plan treatment of support obligations. Bankruptcy laws clearly provide that the filing of a bankruptcy will not result in the elimination or modification of support obligations.

Domestic Support Obligations Nondischargeability

Under bankruptcy laws, alimony, maintenance, and child or spousal support are automatically excepted from discharge in Chapter 7, 11, 12, and 13 cases as long as the debt is owed to a spouse, former spouse, or child of the debtor, for alimony or maintenance in connection with a separation agreement, divorce decree, or other order of a court. However, only court-ordered spousal or child support payments are protected by law from being discharged in a bankruptcy. Private agreements for support payments that are being made without a court order can be terminated in a bankruptcy proceeding. Child support arrearage or college expenses for grown children are also non-dischargeable.

Expenses Considered Support

Other expenses that might be considered support by the court include the following: Life insurance; medical expenses, including out-of-pocket expenses; debts for the birth expenses and necessaries for an out-of-wedlock child; dental bills; mortgage payments; housing expenses; day care expenses; and payments for a former spouse's car and attorney's fees related to support acquistion, modification or enforcement are usually considered "support" for the spouse or child.

How Does Filing Bankruptcy Affect Child Support and Spousal Support?

If you or your former spouse files bankruptcy, the Bankruptcy Code provides answers to how child support and spousal support are affected.

I. The Automatic Stay Imposed By Filing Bankruptcy Does Not Apply to Child Support and Spousal Support

The automatic stay, the injunction that stops other court proceedings when a bankruptcy is filed, does not stop or prevent support proceedings in state courts. If you file bankruptcy, you must continue to pay your support as previously ordered in statecourt. If your former spouse filed a motion to hold you in contempt for failure to pay your support, that hearing will go forward. If your former spouse, or the county prosecutor’s office may file a motion to enforce your obligations in the state court while your bankruptcy case is open, he bankruptcy court will not intercede to have the state court proceedings interrupted, postponed, or cancelled.

II. Child Support And Spousal Support Obligations Are Not Discharged By Filing Bankruptcy

The Bankruptcy Code specifically excludes from the bankruptcy discharge of debts any obligations for child support or spousal support. Although you must include the name of the person to whom you owe child support and spousal support as a creditor in your bankruptcy petition, you will continue to be personally liable for the child support and spousal support you owe to your former spouse, as if you had not filed bankruptcy.

III. Child Support and Spousal Support Must Remain Current While Your Bankruptcy Remains Open

The Bankruptcy Code requires you to remain “current” on your child support and spousal support obligations while you are in bankruptcy, that is, while your bankruptcy case remains open.

Being “current” does not mean that you must have all child support and spousal support paid up with no arrearages on the date you file your bankruptcy petition. Being “current” means that, from the date you file your bankruptcy petition until you receive your bankruptcy discharge, you must make your payments pursuant to the state court order. In other words, if you have an arrearage in child support or spousal support on the date you file your bankruptcy petition, you may not get further behind, and you must make all regular child support or spousal support payments due until you receive your bankruptcy discharge; if you are current on your child support or spousal support obligations on the date you file your bankruptcy petition, you may not have any arrearages occur until you receive your bankruptcy discharge.

If you do not remain current on your child support and spousal support obligations during your bankruptcy proceedings, you may not be eligible to receive a discharge of your dischargeable debts. In effect, if you do not remain current on child support and spousal support obligations while in bankruptcy proceedings, you could defeat the purpose of filing bankruptcy, which is to receive a discharge of your dischargeable debts.

IV. Child Support and Spousal Support Are Not Dischargeable Debts

The Bankruptcy Code specifically excludes child support and spousal support obligations from the discharge. You continue to be legally responsible for child support and spousal support. Your former spouse may pursue collection efforts against you, or the county prosecutor’s office may act on your former spouse’s behalf, in state family court, to require you to pay the child support and spousal support you owe. In essence, although you must list your former spouse as a creditor for the child support and spousal support obligations you have in your bankruptcy petition, those obligations remain your responsibility both during and after your bankruptcy case is completed.

V. My Experience Can Benefit You When Filing Bankruptcy

Contact the law firm of Steven P. Taylor, P.C. at (317) 271-1111 or (765) 868-0807 for a free consultation to determine if bankruptcy is right for you or email me your questions. Attorney Steven P. Taylor’s practice is focused on consumer bankruptcy law and he possesses the knowledge and experience necessary to guide you through a successful bankruptcy filing

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